Hedegaard urges development banks to divest from fossil fuels

Climate Commissioner Connie Hedegaard has called for development banks with a combined annual lending pot of €130 billion to end support for fossil fuels in their energy lending policy reviews.

“I am particularly keen to see three international financial institutions – the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD) and the World Bank – join with their EU and OECD partners to take a lead role in eliminating public support for fossil fuels,” she said in the foreword to a report on bank lending policies in the Western Balkans, published on 25 June.

Although all three banks have policies aimed at encouraging lending to renewables and energy efficiency, in practice fossil fuel projects, plants and infrastructure continue to benefit from their largesse. Natural gas projects are a main source of funding.

According to the new South East Europe Change Network (SEECN) report, between 2006 and 2012, 32 times more of the €1.68 billion invested by development banks in the Western Balkans’ energy infrastructure went to fossil fuels than to non-hydropower-based renewables.

The report found that fossil fuels accounted for 36% of all bank loans in the region and almost half of the lending from the biggest regional lender, the EBRD. More broadly, around half of the EBRD’s annual €6.7 billion of energy lending goes to fossil fuels.

“Multilateral lenders can lead by example by restricting conditions for public financing of coal, the most damaging fossil fuel, and by pressing for greater transparency in reporting on emissions,” Hedegaard said.

She also called on the banks to increase spending on renewables and energy efficiency. The SEECN report found that only 17% of bank lending to the Western Balkans currently goes to energy efficiency projects.

Later this month, the EBRD will unveil a new draft energy lending policy. EurActiv understands that a current version of the text specifies more precise criteria for funding fossil fuel – especially coal – plants.

However, an EBRD insider told EurActiv that the bank review would be “neutral” on shale gas.

“We’re neither enthusiastic nor allergic to the technology per se,” he said, “and if it proves commercially viable, with all environmental concerns properly addressed, I don’t think there will be any issues with financing it.”

The EBRD is oriented to the private sector and non-EU governments such as the US and Japan hold significant shareholdings. By contrast, the EIB has a mandate to act as “the financial agent of the European Union” and access to a significantly greater energy funding pool of around €14 billion a year.

EIB lending plans

The EIB’s draft lending plan, announced on 24 June, also set out new criteria reflecting its priorities of growth, energy security and sustainable development.

These drew environmental ire for pitching an emissions performance standard of 550 grammes of CO2 per kilowatt hour (g/kWh), which compares unfavourably with the 420 g/kWh introduced in Canada last August.

It may even compare unfavourably with new US power plant standards heralded by President Barack Obama on the same day that the EIB launched its draft policy. This is especially so, as the EIB may exempt fossil fuel lending when a plant “contributes to security of supply” within the EU, or "poverty alleviation and economic development” outside it.

The proposed new EIB rules would also allow funding for new coal and gas plants, and for shale gas and nuclear projects.

Berber Verpoest, the coordinator of the Brussels-based bank monitoring organisation Counter Balance, called it “a shift away from the sustainable investments we need and a huge disappointment for anybody hoping the EU is willing to take the lead in tackling climate change.”

Background

The EU has set itself a legally-binding goal for 2020 of reducing its carbon dioxide emissions by 20% and increasing the share of renewables in the energy mix by the same amount, both measured against 1990 levels.

A target of a 20% increase in energy efficiency has also been set but it is not legally enforceable.

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